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10 years after 9/11, the airline industry is looking up

The terrorist attacks began a decade of economic misery for the nation's air carriers and increasingly intrusive airport screening for passengers. But profits are rising as fliers grudgingly accept heightened security measures.

September 10, 2011|By Hugo Martín, Los Angeles Times
  • George Carrillo, left, Dana Carpenter, Kelly Bart, Brian Beel and Rich Labbe, all visiting from Albuquerque, watch from a grassy area in Westchester as a plane arrives at Los Angeles International Airport in August.
George Carrillo, left, Dana Carpenter, Kelly Bart, Brian Beel and Rich… (Genaro Molina, Los Angeles…)

The terrorist attacks that shocked the nation 10 years ago today devastated few industries as much as the airline business.

In the decade that followed, U.S. air carriers have been battered by a sharp drop in demand, soaring fuel prices, wars, an outbreak of the deadly SARS virus and a stinging recession — forces that have led to billions of dollars in industry losses.

Taxpayers and passengers have also had to pay in cash, delays and frustration: Air passengers shell out $1.8 billion annually in new airline fees to help fund $57 billion in airport security improvements mandated by the federal government over the last decade.

The resulting gantlet of airport screening measures has made flying more time-consuming and burdensome, requiring millions of travelers to shed their shoes and coats at crowded security checkpoints, and to march through high-tech scanners that peer through their clothes.

"I object to the continual escalation of the intrusion in the past 10 years," said Glen Mowrer, a frequent traveler and retired attorney from Santa Barbara, who echoed the sentiments of many frustrated passengers.

Yet even as the travel industry marks a decade of financial strain, the future seems a bit brighter for airlines. Airline profits have increased marginally over the last year, a reflection of growing demand for air travel and the public's grudging acceptance of the heightened security measures.

"We, as a company, will never forget that terrible day and the days that followed, but we also strive to move forward with our business," said Ed Martelle, a spokesman for American Airlines.

Federal officials, airline representatives and travel trade groups have endorsed a new security process that targets high-risk travelers so that frequent fliers can once again speed through airport checkpoints.

"A long line at the airport does not improve security," said Roger Dow, president of the U.S. Travel Assn., the trade group for the nation's travel industry.

Financial tailspin

Even before the Sept. 11 attacks, major airlines such as United and American faced declining profits. The primary culprits: rising expenses, excess capacity because of the growth of the airline industry and competition from low-cost carriers like Southwest Airlines.

After the terrorist strikes, the industry went into a financial tailspin.

"We were literally on our knees within one hour," Dow said.

But the terrorist attacks were only partly to blame for a decade of economic misery.

An outbreak of severe acute respiratory syndrome, or SARS, in Asia cut demand on some international routes and cost the industry billions in revenue in 2003.

Then, starting in 2005, oil prices began to soar, pushing fuel costs up from about 13% of total expenses for most airlines to nearly 40% or more today. Just as airlines were adjusting to the higher fuel prices, the recession struck in 2008, further damping demand for air travel.

As a result, the nation's 10 largest airlines combined lost an estimated $29 billion between 2001 and the first six months of 2011, according to Robert Herbst, an independent airline analyst.

Airline revenues fell so sharply that by 2005, four of the nation's five largest carriers — Delta Air Lines, Northwest Airlines, United Airlines and US Airways — filed for bankruptcy protection. This allowed some airlines to renegotiate contracts and costly pension plans, saving them billion of dollars. Still, most of the major national airlines continued to struggle with sluggish demand and rising expenses.

But things are now looking up.

Last year, most of the nation's largest airlines started to rebound from the recession, with several carriers reporting their biggest earnings in a decade. Profit margins were bolstered by growing travel demand and hefty revenues from extra passenger charges such as baggage fees, most of them added in response to the recession.

Fees levied on passengers to cancel reservations, check luggage and other expenses generated $6.6 billion last year for the nation's airlines, a nearly 400% increase from the fees collected in 2001.

Average airfares have remained relatively stable, increasing only about 5% from 2001 to 2010. But baggage fees, fuel surcharges and a federally mandated Sept. 11 security fee have bumped up the cost of flying, even doubling the fare on some international routes.

Airlines also have made strategic changes. Several have merged or are in the process of merging — most notably United and Continental, which will operate as one airline by next year. Some carriers have also mothballed unneeded airplanes to save money.

To increase profits, airlines have begun to pack more passengers into each plane. In 2001, the nation's domestic flights took to the skies with an average of 69% of seats filled. By last year, that rate had grown to a record 82%.

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